How Can You Decide Loan Tenure with Personal Loan Emi Calculator?

by Shashank Bhaskar Finance Adviser

A personal loan is one of the most popular types of loans available in the market today. This loan is both unconditional and unsecured. This means that the borrower does not need to put up any security to avail this loan. This means many borrowers opt for this loan. Many lenders offer this loan to people and have online loan application which makes it easy for people to apply for loans whenever they need funds.

One of the important things to remember when you apply for personal loan is that most lenders allow you the flexibility to set your loan tenure between the loan tenure range that they have. This is a very critical decision you need to make since the loan tenure decides the total interest you pay as well as the amount of monthly instalment you need to pay.

Earlier, you had to apply for the loan and decide the tenure before you found out the monthly instalment amount. However, with the digital revolution, there is no need to apply for the loan to find out the monthly instalment amount. This can easily be found using a personal loan calculator. This is a free tool available on most lender websites.

The personal loan EMI calculator requires the following inputs:

Principal amount
Loan tenure
Rate of interest

The personal loan EMI calculator lets you adjust the three inputs and displays the instalment amount for each combination. This makes it very clear to understand the impact of different inputs on the instalment amount. This can be used to compare the loan offerings of different lenders to find out which loan gives you the lowest instalment. A personal loan calculator can also be used to decide the right loan tenure. Most lenders have a loan tenure between 12 months to 84 months depending on the lender.

If you opt for a longer loan tenure, the instalment amount reduces because the principal must be repaid over a longer period. However, in such a case, the total interest amount that needs to be paid is higher since there are more instalments. An instalment consists of principal repayment and interest payment. The first charge on the instalment amount is the amount of interest. Any balance amount is the principal amount that is repaid. Precisely why if you opt for a longer loan tenure, then the total interest amount increases. Some personal loan calculators have an amortization schedule which shows the breakup of instalment into principal repayment and interest payment.

On the other hand, if you opt for a smaller loan tenure, the total instalment amount increases. It is important to opt for a shorter loan tenure only if you can service the loan instalment. In case you can’t service the loan instalment, then you should opt for a slightly longer loan tenure so that you don’t have to pay any interest on outstanding instalments. You can pre-pay the principal amount at any time if you have surplus funds.

The personal loan EMI calculator is a very useful tool to use while planning your loan application. Based on your monthly expenses, you can choose a loan tenure that works to your best advantage. This can help you affordably service your loan keeping your monthly budgets and spends in mind. Remember, you will find this tool on your mobile banking apps.